Where is it actually cheaper to drive an electric car? What's the impact for business?, Mike Daly

'Norway—where 98% of electricity comes from renewable sources—is one of the top performers on both measures. Driving an EV there cuts fuel costs by about 83% and emissions by 98% compared with driving a petrol car.

High electricity prices—elevated since Vladimir Putin’s invasion of Ukraine—mean that EV drivers in Britain, Belgium, Italy, Ireland and Germany saved less than 50% per mile, based on residential energy prices in 2023.'

The Economist 22nd Nov, 2024

UK Ministers this week resisted calls to ease the trajectory for the introduction of EVs by delaying fines until the end of 2025. More UK-made models will be launched by then, giving carmakers a better chance of competing with imports of Chinese EVs. Despite the potential for an industrial and political crisis if drivers carry on delaying EV purchases, they are sticking to their strategy. In practice, EU fleet emissions rules may lead to a similar result in the short term. Barclays estimates that 28 per cent of the vehicles sold by European carmakers next year must be EVs for them to avoid billions in fines, the same as the ratio set by the UK for 2025. Some companies are also lobbying for the EU’s emissions regulations to be relaxed.

The high electricity charges in Europe, and particularly the UK, do not help motivate consumers to migrate to EVs. Uncertainty does not help the industry, whether auto manufacturers, repair networks, those deploying charging networks, or insurers planning product strategies.

Florian Graillot, an investor (insurance and emerging risk) recently wrote " …. highlights a key challenge related to EVs from an insurance perspective. I believe EV batteries are one of several factors challenging the traditional methods incumbents use to assess, model, and price car insurance policies. Compared to gas cars, this requires a dramatic revamp in insurance underwriting: addressing such "emerging risks" requires identifying and accessing new datasets, developing algorithms to analyze and interpret this data, and carrying these risks accordingly."

Governing nations is difficult at the best of times and this decade has been rocked by war, extreme weather, ballooning government debts, and political unrest.

Balancing goals that are often in conflict, like achieving net zero by a particular year and managing the transition from ICE vehicles to EVs and fossil fuels to renewable energy pragmatically is one example.

A challenge that insurers are positioned in the middle of. Providing protection against risk and operating within a regulatory and legislative framework that is often uncertain.

Insurance has a leading role to play in influencing government strategy and implementing its strategies to provide cover for current and unmet risks. The current pricing and coverage of EVs is a micro example of this macro challenge. Fear of the unknown is holding back innovation and cover.

Data is available to make the right decisions and the emergence of MACH-architected systems and applications provides the means to escape the restrictions of inflexible and complex legacy and ‘new legacy’ technology.

These technologies can be deployed to meet longer-term ( a decade?) strategic goals and short-term quicker wins (2025-26). New products and functionality are built as modern microservices alongside legacy and new legacy systems.

Some insurers like esure took the plunge to migrate the whole business to new MACH platforms and applications including: -

Cloud-based Amazon Web Services (AWS);
Omni-channel contact centre Amazon Connect;
Digital Insurance Coretech platform from EIS;
The RightIndem Digital Claims Platform
EY implementation partner

Others will take a more gradual approach but must have the long-term vision and strategy plotted carefully.

Potential MACH-architected Policy Admin and Coretech technology partners include:

Critical to that is building a ‘Universal Information Layer’ across the whole business i.e. all aspects of the insurance value chain. This is the basic starting point for providing people across the enterprise with the information to make decisions and do their jobs effectively.

And, a vital point, provide the data, real-time and historical, to deploy composite AI across the enterprise without having to wait for data warehouse/data lake projects to be completed.

Partners such as Aiimi and Palantir, having proved themselves capable in other industries and the public sector, now offer these services to insurers.

They have already faced a restricting aspect to innovation band harnessing composite AI as Palantir's CTO explains.

"Shyam Sankar: “I think the critical part of it was really realizing that we had built the original product presupposing that our customers had data integrated, that we could focus on the analytics that came subsequent to having your data integrated. I feel like that founding trauma was realizing that actually everyone claims that their data is integrated, but it is a complete mess and that actually the much more interesting and valuable part of our business was developing technologies that allowed us to productize data integration, instead of having it be like a five-year never-ending consulting project so that we could do the thing we started our business to do.”

Which brings me full circle back to where we started- the transition from ICE vehicles to EVs, the uncertainties caused by changing government strategies (or lack thereof), and the fact that insurers still have to plan and operationalise innovative products and services.

Without adaptive, data-fluid, and ecosystem-enabling MACH technologies they will fall behind.